Building Native-Owned Renewable Energy Generation in Indian Country
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William & Mary Environmental Law and Policy Review Volume 43 (2018-2019) Issue 2 Article 3 January 2019 From Exploitation To Equity: Building Native-Owned Renewable Energy Generation In Indian Country Michael Maruca Follow this and additional works at: https://scholarship.law.wm.edu/wmelpr Part of the Energy Policy Commons, Environmental Law Commons, and the Social Policy Commons Repository Citation Michael Maruca, From Exploitation To Equity: Building Native-Owned Renewable Energy Generation In Indian Country, 43 Wm. & Mary Envtl. L. & Pol'y Rev. 391 (2019), https://scholarship.law.wm.edu/wmelpr/vol43/iss2/3 Copyright c 2019 by the authors. This article is brought to you by the William & Mary Law School Scholarship Repository. https://scholarship.law.wm.edu/wmelpr FROM EXPLOITATION TO EQUITY: BUILDING NATIVE- OWNED RENEWABLE ENERGY GENERATION IN INDIAN COUNTRY MICHAEL MARUCA* ABSTRACT Indian country contains abundant renewable energy resources, and harnessing such resources is vitally important for national climate change mitigation efforts. Shifting the electric grid towards wind and solar generation also carries local environmental and health benefits, increases energy independence, and serves national security interests. For willing tribes, renewable energy development offers an opportunity for job growth and income base expansion. But if that development is to serve all parties— tribes, states, and the nation—then the current policy framework must change. If it does not change, policymakers risk continuing the long his- tory of exploitative resource development on reservations. This Article examines how legal structures impede utility-scale renewable energy development in Indian country and limit tribal self- determination. At the beginning of the Obama Administration, with in- creased national interest in climate change, commentators seized upon the potential of renewable energy to increase tribal sovereignty, improve Native economies, and provide greater access to electricity.1 Following years of false starts, legal scholars asked why the clean energy revolution * JD, Harvard Law School 2018. The author would like to thank Professor Joseph Singer for his supervision, consistent support, and clear advice over several months. Thank you. Michael Connolly Miskwish gave invaluable input concerning the tax regime and lessons from Kumeyaay wind. The author also heavily relied upon Michael O’Connell, Chip Lewis, and George Burdette’s generous donation of both their time and valuable insights. Professor Robert Anderson is largely responsible for sparking the author’s interest in Indian law and provided important research connections. Lastly, Ari Peskoe of the Electricity Law Initiative at Harvard gave excellent advice on how to find project details in state filings. 1 Racheal M. White Hawk, Community-scale Solar: Watt’s in it for Indian Country?, 40 ENVIRONS 1 (2016); Crystal D. Masterson, Wind-Energy Ventures in Indian Country: Fashioning a Functional Paradigm, 34 AM. INDIAN L. REV. 317 (2009). See, e.g., Ryan David Dreveskracht, Native Nation Economic Development Via the Implementation of Solar Projects: How to Make it Work, 68 WASH. & LEE L. REV. 27 (2011); Kathleen R. Unger, Change is in the Wind: Self-Determination and Wind Power Through Tribal Energy Resource Agreements, 43 LOY. L.A. L. REV. 329 (2009). 391 392 WM. & MARY ENVTL. L. & POL’Y REV. [Vol. 43:391 was passing by Indian country and identified obstacles that slowed the growth of renewables.2 Despite such barriers, by the end of 2017, a few large projects were operational. This Article examines how those projects succeeded within the current framework. The working installations serve as a rebuke to decades of abusive resource extraction arrangements and dirty fossil fuel power plants, which have produced severe health impacts and environmental degradation on Indian lands. But they also show how the existing legal and policy frameworks compel tribes committed to renew- able energy development into certain arrangements, which then place con- straints upon tribal sovereignty and limit the potential benefits to tribes. Part I explains U.S. electricity law and renewable energy potential in Indian country. Part II addresses how the current legal and policy frame- works underpinning projects impede the widespread adoption of renew- able energy in Indian country. Part III covers recent successes and failures, in order to draw functional lessons for parties interested in pursuing wind and solar projects within the existing framework. Part IV recommends policy and legal reforms that would increase tribal ownership of renewable energy projects while benefiting tribes, states, and the country as a whole. In particular, recommended reforms include providing mechanisms that promote self-determination through tribal project ownership, increasing federal financial support mechanisms, changes to current electricity regu- lations, and amending federal and state tax regimes to avoid stifling de- velopment in Indian country. I. WIND AND SOLAR ENERGY DEVELOPMENT IS A POSITIVE OPPORTUNITY FOR CERTAIN TRIBES .................... 396 A. The Transition Is Beginning ................... 397 B. Indian Lands Carry Significant, and Largely Untapped, Renewable Energy Resources .......... 399 C. Harvesting Wind and Solar Resources Requires an Understanding of Electricity Law, Which Is Fragmented and Complex ..................... 403 1. A Brief History of Electricity Law; the Emergence of a Competitive Market in Generation............................ 404 2 Elizabeth Ann Kronk Warner, Tribal Renewable Energy Development Under the HEARTH Act: An Independently Rational, but Collectively Deficient, Option, 55 ARIZ. L. REV. 1031, 1031 (2013) (“[L]arge alternative and renewable energy projects are virtually absent from Indian country. This article explores why such little development is happening despite the great potential for alternative and renewable energy development in Indian country and strong tribal interest in such development.”). 2019] FROM EXPLOITATION TO EQUITY 393 2. Incentives for Wind and Solar............ 410 3. The Unique Position and Special Challenges for Tribal Renewable Projects............ 412 D. Projects on Indian Lands Can Increase Tribal Sovereignty and Self-Determination While Also Serving National Security and State Policy Goals ... 416 1. Tribal Interests........................ 416 2. State Interests........................ 419 3. National Interests...................... 420 II. THE UNDERLYING LEGAL AND POLICY STRUCTURES IMPEDE TRIBES AND POTENTIAL NON-INDIAN PARTNERS .......... 422 A. The Regulatory System for Leasing Indian Lands Limits Tribal Participation .................... 423 1. Federal Indian Law and the Inalienability of Native Nations’ Lands.................. 424 2. HEARTH Act: The Primary Method for Renewable Development in Indian Country. 425 3. ITEDSA’s Unmet Promise............... 428 a. Alphabet Soup, or the History Behind ITEDSA (from IMLA to IMDA to ITEDSA’s TERAs)................ 428 b. Why No Tribe Has Used the Statute for Renewable Energy Project Ownership...................... 430 c. Insurmountable Costs............ 431 d. The Broad Waiver of Federal Liability ........................ 432 e. Mandatory Environmental Review Provisions Interfere with Tribal Sovereignty..................... 433 f. Areas of Uncertainty May Impede Commercial Agreements.......... 434 4. Incomplete Paths: Section 81, Easements, and Tribal Corporations................. 435 a. The Limits of Section 81 Approvals . 436 b. Rights of Way and the Fears of Losing Jurisdiction..................... 436 c. The Potential for Section 17 Corporations?................... 438 B. Federal Financing Is Inadequate................ 438 394 WM. & MARY ENVTL. L. & POL’Y REV. [Vol. 43:391 C. State Taxation and Federal Tax Credits Put Projects on Indian Lands at a Competitive Disadvantage and Push Tribes into a Lessor-Lessee Relationship with Non-Indian Developers........................ 442 1. Federal Tax Incentives Put Tribes Seeking Ownership Interests at a Competitive Disadvantage......................... 442 2. State Taxation Strangles Indian-Owned Projects.............................. 445 a. The Potential for Double Taxation. 446 b. State Tax on Sales of Electricity from Tribal-Owned Projects Should Be Preempted................... 448 c. The Failed Attempt to Fix Dual Taxation Through Regulation...... 449 D. Lack of Trust Raises the Cost of Projects with Non-Indian Business Partners.................. 450 1. The History of Resource Extraction in Indian Country and the Complexity of Business Structures Underlying Renewable Projects Lead Tribes to Distrust Potential Partners...... 451 2. For Non-Indian Developers, Uncertainty and Perceived Risk Create Distrust........... 453 a. Uncertainties Due to Court Holdings and a Thin History of Tribe-to-Non-Indian Contracting..................... 453 b. True Risks Are Lower than Many Believe and Can Usually Be Mitigated...... 454 c. Concerns About Regulatory Delays Are Overblown...................... 455 3. Trust Issues Can Be Overcome........... 457 III. RECENT SUCCESSES PROVIDE LESSONS ON HOW TO BUILD RENEWABLE ENERGY PROJECTS IN INDIAN COUNTRY....... 457 A. Kumeyaay Wind ............................. 458 1. Kumeyaay I Succeeds................... 459 2. Kumeyaay II Fizzles Out................ 461 3. Lessons from Kumeyaay I and II.......... 462 B. Moapa Solar ................................ 463 1. Motivation Behind Moapa Solar and Tribal Action to Facilitate